LikeFolio Weekly Roundup: AI Explosion Has Multiple Big Winners

AI Explosion Has Multiple Big Winners

Election week was a gut check for AI stocks.

Chip stocks fell hard after Democrats won both chambers of Congress, on fear of tighter AI rules and pushback from voters on data centers.

Then Nvidia (NVDA) CEO Jensen Huang resigned Thursday, and Nvidia’s stock hit a 52-week low.

Money ran into AMD (AMD) and Broadcom (AVGO). Today that trade is reversing: AMD is down 11%, Broadcom 6% and Nvidia 4%.

Our Midterm Election Special Report went out Nov 5 with a watchlist of twelve stocks: six positions we marked for accumulation and six stocks to watch to buy.  

Now it’s time to check in. So far, the AI trade is winning in a big way.

We expect multiple big winners from this AI buildout, and think many of these stocks have room to run.

Why?

Big Tech capex continues to explode, AI supplier revenue keeps expanding, and interest in AI chips shows no signs of slowing.

Big Tech Spends More on AI Every Year

Amazon (AMZN), Alphabet (GOOGL), Microsoft (MSFT) and Meta (META) plan about $730 billion of capital spending this year, by each company’s own October guidance. Goldman Sachs expects those four plus Oracle (ORCL) to spend $1.2 trillion next year, and Alphabet told investors its spending rises significantly in 2027.

Every AI Supplier Grew Last Quarter

Every company in this supply chain grew revenue last quarter, from Micron (MU), whose revenue nearly quintupled, to TSMC (TSM) and Marvell (MRVL). Nvidia more than doubled. Growth that broad means a bigger pie, with room for more than one winner.

Searches for Rival AI Chips Are Climbing

Google searches for AI chips are up sharply from a year ago, and two chips that compete with Nvidia lead every term we checked: Alphabet’s TPU and AMD’s MI450.

Three Stocks We Would Never Bet Against

• AMD wins on inference. Training an AI model is Nvidia’s business. Running that model for millions of users every day is inference, and inference grows as more people use AI. AMD’s new racks run both, and we think inference is where AMD wins buyers nervous about Nvidia. Those racks started shipping last quarter to Anthropic, Meta, Microsoft, OpenAI and Oracle, and AMD’s CEO says demand is higher than supply. Our data agrees: purchase intent for AMD chips is up 82% from a year ago, and of every measure we track, purchase intent follows AMD’s revenue most closely.

• Broadcom (AVGO) is a custom chip play. It builds Meta’s custom AI chip, which went into production last quarter. We flagged Broadcom in September, when Meta’s stock jumped on its AI plans and Broadcom’s had not moved. Broadcom’s stock has round-tripped through last week’s selloff and sits about where we flagged it. Its CEO says AI revenue doubles next year, with supply secured.

• Alphabet (GOOGL) makes its own AI chip, called a TPU. Amazon and Microsoft build their own chips too, but Alphabet’s TPU has run its own AI for years, and Google Cloud now rents it to other AI companies. Anthropic signed up for gigawatts of TPU capacity, and Alphabet says close to 100 outside customers use it. TPU searches are up 220% from a year ago, top of our search chart. Everyone else in this buildout is a buyer. Alphabet is a buyer and a seller.

Nvidia Looks Interesting Down a Third

Nvidia’s stock is down a third from its October high, and consumer interest in its chips is climbing.

Goldman Sachs kept its Buy rating after Huang left and compared this moment to Apple (AAPL) after Steve Jobs: profits kept growing while investors spent years deciding what multiple to pay.

Apple never replaced Jobs. Under Tim Cook its stock rose about 23 times, revenue went from $108 billion a year to $479 billion, and Apple became America’s first company worth $1 trillion, $2 trillion and $3 trillion. Cook handed Apple to John Ternus in September with its stock near a record.

Nvidia reports Tuesday. Earnings Season Pass members can watch for our trade (we do have a call!) on the Sunday Earnings Sheet.

Infinite Hold Updates

Amazon (AMZN): An $18 Billion AI Bet Could Pay Off Big

Amazon's $18 billion investment in Anthropic could soon be worth a fortune.

The company behind Claude is preparing for a potential IPO later this month, with Wall Street expecting a valuation between $1.5 trillion and $2 trillion.

At the high end, Anthropic could surpass SpaceX as the largest IPO in history.

Amazon is one of its biggest backers.

According to its latest quarterly filing, Amazon has invested $18 billion in Anthropic. As of Sept. 30, those investments were valued at $92.5 billion, with another $146.2 billion in notes set to convert into stock when Anthropic goes public.

The final IPO valuation will determine what those holdings are worth.

But Amazon could make a lot more money from Anthropic over the next decade.

Anthropic has agreed to spend more than $100 billion on Amazon Web Services (AWS) over the next 10 years.

That means Amazon gets paid to supply the computing power Anthropic needs to train and run its AI models.

And AWS keeps expanding to serve more customers.

This week, Amazon announced plans to invest more than $4 billion in Chile, where it has opened its first AWS cloud infrastructure region to select customers.

The new facilities will help businesses across Chile and neighboring countries run cloud applications faster and keep their data closer to home. AWS says 78% of Chilean companies are already integrating AI into their operations.

The expansion comes as Amazon races to meet growing demand for AI computing power around the world.

For us, the $100 billion Anthropic agreement is the number to watch.

Amazon has a major financial stake in one of the world's leading AI companies. And Anthropic has committed to spending billions on AWS whether it goes public this month or not.

We're sticking with Amazon as it builds out that business.

Google (GOOGL): Wall Street Is Betting Against Google. We Aren’t.

$51 billion. In three months.

That's how much Google spent on AI infrastructure last quarter.

And Wall Street didn't like it.

Shares plunged nearly 13% on Oct. 29 as investors worried about Google's soaring costs and whether its AI investments would pay off.

By Nov. 9, the stock was still trading 10% below its pre-selloff close.

We think investors are underestimating Google

In 2017, eight Google researchers published a paper called Attention Is All You Need.

It introduced the transformer technology that powers ChatGPT and nearly every major AI chatbot today.

Google helped invent the technology behind the AI boom. Yet OpenAI beat it to market.

And it wouldn't be the first time Google let a competitor get a head start.

Take Gmail.

When Google launched its email service in 2004, Microsoft's Hotmail was already a household name.

But Hotmail gave users just 2 megabytes of free storage. Gmail offered 1 gigabyte – roughly 500 times as much.

People switched. Today, Gmail has 1.8 billion users.

Google followed a similar path with search, taking on early leader AltaVista and building a business that now generates roughly $63 billion in quarterly revenue.

We think Google has a real shot at repeating that success in AI.

Its DeepMind team helped develop AlphaFold, an AI breakthrough that earned two researchers a Nobel Prize in Chemistry.

And Google has access to enormous amounts of data from billions of people using Search, YouTube, and Gmail.

Google is expanding ads in its AI-powered search tool, AI Mode. And management expects a meaningful jump in AI-related revenue in 2027 as its new data centers and chips begin generating sales.

Google's heavy spending has pushed free cash flow below zero for two straight quarters. So investors want proof that the investment will pay off.

We're watching how Google's AI products stack up against the competition.

At LikeFolio, we use AI in everything we do. And we're loyal to no single provider.

We use whichever model gives us the best results for the best price. Today, that's Anthropic. If Gemini offers something better tomorrow, we'll switch.

Millions of other businesses face the same choice.

And Google has the talent and money to win them over.

Google helped invent the technology behind ChatGPT. Now it's spending billions to build an AI business of its own.

We're giving Google time to turn that investment into growth.

Alphabet remains an Infinite Hold.

Tesla (TSLA): Cybertruck Gets More Time – and Demand Keeps Climbing

Tesla is giving Cybertruck buyers a little more time.

On Wednesday, Elon Musk announced that Tesla will extend Cybertruck production through the end of summer 2027, several months beyond its original deadline.

The company still plans to wind down production of the stainless-steel pickup. But Musk wants to fill as many outstanding orders as possible before shutting down the line.

He acknowledged that extending production may not be the best financial decision, adding that there should be some room for sentimentality.

Cybertruck may be nearing the end of its run, but our data shows growing interest in Tesla's broader lineup.

Last week we highlighted three encouraging signals:

• Tesla website visits are up 44% year over year. More people are visiting the site where customers can order vehicles.

• Consumers switching to Tesla from competing brands are up 144%.

• More than three out of four new North American buyers pay for Full Self-Driving (FSD).

That last figure is especially exciting to us.

We've long believed self-driving could transform the auto industry. And Tesla is already getting customers to pay for it.

Even insurance companies are taking notice. Lemonade (LMND), which sells car insurance, charges Tesla owners roughly half its usual per-mile rate for miles driven using FSD.

That's a significant vote of confidence in Tesla's self-driving technology.

We believe self-driving is the biggest change to cars since the engine, and Tesla is furthest ahead.